Another kind of employer health coverage

Pharmacist Ann Nguyen works on orders Thursday at a Walgreen's in Santa Ana. Walgreen's will send its 160,000 insurance eligible employees nationwide through a privately-run exchange for coverage starting next year. MIGUEL VASCONCELLOS, FOR THE REGISTER

Starting next year, Walgreen Co. will send its 160,000 insurance-eligible employees to a private health exchange run by Chicago-based Aon Hewitt. That makes the drugstore chain a big fish in a small but rapidly growing pond.

Like Obamacare, private insurance exchanges offer several health plans from various insurance providers. Employees use a website to comparison shop and sign up for coverage. Participating employers give workers a fixed amount of money rather than covering a set percentage of the plan they choose. Employees can choose a level of coverage similar to what they have already, or they can choose something cheaper or more expensive, depending on their individual needs.

Their employers will not have to pay a federal penalty, as they would if employees got subsidized coverage through the public exchanges. That's because in a private exchange, the employers are still the ones providing the health benefits.

“They're just doing it another way,” says Mike Christie, a senior vice president at Illinois-based Aon Hewitt. “They're not exiting. They're not sending their employees off somewhere else.”

Employers have long struggled with the rising costs of medical coverage. The new Affordable Care Act, with its emphasis on cost control and greater individual responsibility for health care, may be helping to spread ideas – like private exchanges – that were already under consideration by some companies, industry observers say. Shifting to a fixed dollar amount, an idea at the heart of the private exchanges, was already underway pre-Obamacare.

“Health care costs are the driving factor here,” says John Haslinger, vice president of strategic advisory services for ADP, a national human resources and benefits administration company. “The Affordable Care Act has put an additional spotlight on that issue and brought to bear some potential alternatives that employers had not been seeing.”

Private exchanges next year will have only a miniscule fraction, well under 1 percent, of all insured Americans. But they appear to be gaining traction.

As of January, Aon Hewitt will have 18 large companies signed up, with a total of 600,000 covered employees. Numerous insurance companies and management-consulting firms have their own exchanges, including well-known names such as Mercer and Towers Watson.

“We expected there would be about a million people enrolled in private exchanges this fall, but what we're seeing early on is that it is likely to go beyond that,” says Rich Birhanzel, managing director at Accenture, a management- consulting firm. “We think there is going to be fast-paced growth.”

Walgeen is counting on saving money. Not just because it's handing a set dollar amount to workers, but also because many of them are likely to choose less expensive options.

“Thirty-six percent of our workplace is single and under 30. They may want a high-deductible plan with a low monthly premium,” said company spokesman Michael Polzin. The exchange will offer the younger Walgreen employees premiums as low as $5 a month for high-deductible policies.

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Pharmacist Ann Nguyen works on orders Thursday at a Walgreen's in Santa Ana. Walgreen's will send its 160,000 insurance eligible employees nationwide through a privately-run exchange for coverage starting next year. MIGUEL VASCONCELLOS, FOR THE REGISTER
Pharmacist Ann Nguyen works on orders Thursday at a Walgreen's in Santa Ana. Walgreen's will send its 160,000 insurance eligible employees nationwide through a privately-run exchange for coverage starting next year. MIGUEL VASCONCELLOS, FOR THE REGISTER
Exterior of Walgreens store in Palo Alto, California. Walgreen's will send its 160,000 insurance eligible employees nationwide through a privately-run exchange for coverage starting next year. PAUL SAKUMA, ASSOCIATED PRESS

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